U.S. Supreme Court Bank of Washington v. Triplett & Neale, 26 U.S. 1 Pet. 25 25 (1828)
Bank of Washington v. Triplett & Neale
26 U.S. (1 Pet.) 25
ERROR TO THE CIRCUIT COURT
FOR THE DISTRICT OF COLUMBIA
The deposit of a bill in one bank, to be transmitted to another for collection, is a common usage of great public convenience, the effect of which is well understood, and the duty of a bank receiving such a bill for collection is precisely the same whoever may be, the owner thereof, and if it was unwilling to undertake the collection without precise information on the subject, the duty ought to have been declined.
If in any case in which testimony was offered by the plaintiff the court ought to instruct the jury that he had no right to recover, such instruction certainly ought not to be granted if any possible construction of the testimony would support the action.
By failing to demand payment of a bill held for collection, the bank would make the bill its own and would become liable to its real owner for the amount.
The allowance of days of grace for the payment of a bill of exchange or note is now universally understood to enter into every bill or note of a mercantile character, and so to form a pari of the contract that the bill does not become due until the last day of grace.
It is the usage of the Bank of Washington and of other banks in the District of Columbia to demand payment of a bill on the day after the last day of grace, and this usage has been sanctioned by the decisions of this Court. This usage is equally binding on parties who were not acquainted with its existence but who have resorted to the bank governed by such usage to make the bill negotiable.
The usage of the place on which a bill is drawn or where payment is demanded uniformly regulates the number of days of grace which must be allowed.
The failure of a bank holding a bill payable after date for collection to give notice to the drawer that the drawee was not found at home when called upon to accept the bill is not such negligence as discharges the drawer from his liability.
A bill of exchange payable after elate need not be presented for acceptance before the day of payment, but if presented and acceptance be refused, it is dishonored, and notice must be given. The absence from his home of the drawee of a bill payable after date when the holder of a bill or his agent calls with it for acceptance is not a refusal to accept, but such absence when the bill is due is a refusal to pay, and authorizes a protest.
In a suit instituted by the holder of a bill against the bank for negligence in relation to demand or notice of nonpayment of the bill, the court, although required, is not bound to declare the law as between the holder and the drawer. The bank was the agent of the holder, and not of the drawer, and might consequently so act as to discharge the drawer without becoming liable to its principal.
Triplett & Neale, the appellees, instituted a suit in the Circuit Court for the District of Columbia against the
President and Directors of the Bank of Washington, the appellants; for mal-agency in relation to an inland bill of exchange, dated Alexandria, 19 June, 1817, drawn by W. H. Briscoe, for $625.34 at four months after date in favor of Triplett & Neale upon Peter A. Carnes, Esq., "Washington City." About 19 July, 1817, the plaintiffs, being the holders and the proprietors of the bill, placed it in the hands of the Cashier of the Mechanics bank of Alexandria for the purpose of its being transmitted to a bank in Washington for collection, they endorsing it in blank for that purpose. The bill, after being endorsed by the cashier of the bank to the order of "S. Elliott, Jr. Esq.," was sent by mail to the Bank of Washington, of which Mr. Elliott was then cashier, together with other bills and notes, without any statement of interest or ownership in the same, by Triplett & Neale. On 19 October, 1817, the cashier of the Mechanics bank of Alexandria informed the cashier of the Bank of Washington that
"the holder of the draft desired that if the draft should not be paid, a notary should send a notice to P. A. Carnes, Baltimore, and to Mr. W. H. Briscoe at Lessburgh, provided the bill should not be paid in Washington."
On 24 October, 1817, the draft was returned to the Mechanics bank of Alexandria, it having been protested, for nonpayment on 23 October, the drawer and endorser having been regularly notified of the nonpayment by the notary. When the bill was received in Washington on 21 July, 1817, the drawee was not to be found, one of the officers of the bank having sought him in order to present the bill to him and who was informed that he was in Baltimore. This inquiry was repeated three or four days afterwards with the same results, of which the cashier was informed. No notice of the nonacceptance of the bill was given by the Bank of Washington to the drawer or to the endorser. Evidence was given, by the defendant below of the custom in the banks of the City of Washington, and particularly of the defendants, as to the mode of treating bills when the drawee could not be found and as to the practice of protesting or not protesting such bills for nonacceptance. Evidence was also offered as to the incompetency of Carnes and Briscoe to discharge the bill at the time of its nonpayment, and that since the said period Briscoe had inherited an estate.
The appellants, on the trial of the cause, requested the court to instruct the jury:
1st. That on the evidence, if believed by the jury, the plaintiffs could not recover.
2d. That the plaintiffs are not entitled to recover for and of recourse against Briscoe, the drawer of the bill.
3d. That the failure of the defendants, after having called at the residence of the drawee of said bill, to obtain his acceptance thereof, as stated in the evidence of Reilly, and not finding him or any other person there to accept the said bill, to notify the drawer of that circumstance was not such a negligence as discharged the said drawer from his liability on said bill, and entitles the plaintiffs to recover.
4th. That if it believed from the evidence that the defendants conformed to their former usage in regard to such bills as the one in question in calling on the drawee for acceptance, the said drawee being from home and not noting the same as dishonored and giving notice thereof to the parties on the said bill, then their failure to treat the said bill as dishonored and to give notice accordingly of its nonacceptance did not discharge the drawer thereof from his liability to the plaintiffs.
All of which instructions were refused by the court, and a verdict was given against the Bank of Washington for the whole amount of the claim. The defendants below took a bill of exceptions to the opinion of the court upon the propositions stated and thereupon prosecuted this writ of error.
MR. CHIEF JUSTICE MARSHALL delivered the opinion of the Court.
On 19 June, 1817, Wiliam H. Briscoe, of Alexandria, drew a bill on Peter A. Carnes, of Washington, payable four months after date to the order of Triplett & Neale. The payees of the bill endorsed it in blank and delivered it to the cashier of the Mechanics bank of Alexandria for the purpose of being transmitted through the said bank to a bank in Washington for collection.
The cashier of the Mechanics bank of Alexandria endorsed the bill to the order of the cashier of the Bank of Washington and transmitted it to him for collection in a
letter of 19 July, 1817. Neither of the banks had any interest in the bill.
The bill was protested for nonpayment, and this suit was brought by Triplett & Neale against the Bank of Washington to recover its amount. The declaration charges that the bank did not use reasonable diligence to collect the money mentioned in the said bill, nor take the necessary measures to charge the drawer, but neglected to present the bill either for acceptance or payment and to have the same protested, whereby the plaintiffs have lost their recourse against the drawer.
It was proved on the part of the bank that either on the day the bill was received or the succeeding day one of its officers called with the bill at the house of the said Peter A. Carnes for the purpose of presenting it for acceptance, and was told that he was in Baltimore. He called again three or four days afterwards for the same purpose, and was again told that he was in Baltimore. These answers were reported to the cashier.
On 9 October, 1817, the cashier of the Mechanics bank of Alexandria addressed the following letter to the cashier of the Bank of Washington:
"The holder of the draft on Peter A. Carnes for $625.34 desires me to inform you that if the draft is not paid to make the notary send a notice to P. A. Carnes, Baltimore, and likewise to W. H. Briscoe, Leesburg, provided it is not paid at his residence in Washington."
On the 13th of the same month, the cashier of the Bank of Washington, in answer to this letter, stated that the bill had not been accepted because the drawee could not be found, and that the directions given in the letter of the 9th, should be observed. On 24 October, the fourth day after that expressed on the face of the bill as the day of payment, it was protested for nonpayment and returned under protest to the Mechanics bank of Alexandria. Notice was given to the drawer, who has refused to pay the same.
On the trial the counsel for the defendant moved the court to instruct the jury:
1st. That upon this evidence, if believed, the plaintiffs are not entitled to recover.
2d. That the plaintiffs are not entitled to recover for any loss of recourse against Briscoe, the drawer of the said bill.
3d. That the failure of the defendants, after having called at the residence of the drawee of the said bill to obtain his acceptance and not finding him or any person there to accept it, to notify the drawer of that circumstance was not
such negligence as discharged the said drawer, from his liability on the said bill and entitles the plaintiffs to recover.
4th. That if they believed from the evidence that the defendants conformed to their former usage in regard to such bills as the one in question in calling on the drawee for acceptance (the said drawee being from home) and not noting the same as dishonored, and giving notice thereof to the parties, on the said bill, then their failure to treat the said bill as dishonored and to give notice accordingly of nonacceptance did not discharge the drawer thereof from his liability to the plaintiffs.
The court refused to give either of these instructions, to which refusal the counsel for the defendants excepted, and a verdict and judgment were rendered for the plaintiffs.
The plaintiffs in error insist that the circuit court ought to have given the instructions first asked, because, 1st, no privity existed between the real holder of the bill and the Bank of Washington. That bank was not the agent of Triplett & Neale, but was the agent of the Mechanics bank of Alexandria, some cases have been cited to show that if an agent employed to transact a particular business engages another person to do it, that other person is not responsible to the principal. On this point it is sufficient to say that these cases, however correctly they may have been decided, are inapplicable to the case at bar. The bill was not delivered to the Mechanics bank of Alexandria for collection, but for transmission to some bank in Washington, to be collected. That bank would, of course, become the agent of the holder. By transmitting the bill as directed, the Mechanics bank performed its duty, and the whole responsibility of collection devolved on the bank which received the bill for that purpose; the Mechanics bank was the mere channel through which Triplett & Neale transmitted the bill to the Bank of Washington.
The deposit of a bill in one bank to be transmitted for collection to another is a common usage of great public convenience, the effect of which is well understood. This transaction was unquestionably of that character, and there is no reason for suspecting that the Bank of Washington did not so understand it. The duty of that bank was precisely the same whoever might be the owner of the bill, and if it was unwilling to undertake the collection without precise information on the subject, that duty ought to have been declined. The custom to endorse a bill put in bank for collection is universal, and the Bank of Washington had no more reason for supposing that Triplett & Neale had ceased to be the real holders from their endorsement than for supposing that the
cashier of the Bank of Washington had become the real holder by the endorsement to them. It is the customary proceeding for collection in such cases, and is for the advantage of the party interested. At any rate, the letter of 9 October disclosed the real party entitled to the money; and the answer to that letter, assumes the agency, if it had not been previously assumed. The Court is decidedly of opinion that the Bank of Washington, by receiving the bill for collection and certainly by its letter of 13 October, became the agent of Triplett & Neale and assumed the responsibility attached to that character.
The first prayer of the defendants in the circuit court being to instruct the jury that upon the whole evidence, the plaintiff ought not to recover, if it might properly have been granted in any case in which any testimony was offered, certainly ought not to have been granted if any possible construction of that testimony would support the action.
The liability of the bank for the bill placed in its hands for collection undoubtedly depends on the question whether reasonable and due diligence has been used in the performance of its duty. To maintain the charge of negligence, the counsel for Triplett & Neale have alleged the failure to give notice of the nonacceptance of the bill and the failure to demand payment in proper time. The counsel for the bank have brought the first question more distinctly into view by a more definite instruction respecting it which was afterwards asked, and its consideration will be deferred until that prayer shall be discussed, but the first must be disposed of under the general prayer.
Unquestionably, by failing to demand payment in time, the bank would make the bill its own and would become liable to Triplett & Neale for its amount. The inquiry, therefore, is into the fact.
The demand was made on the fourth day after that mentioned on the face of the bill as the day of payment.
The defendants in error insist that if the bill was never presented for acceptance, payment ought to have been demanded on the day mentioned on its face. If this be not so, then it ought to have been demanded on the third day afterwards, which is the last day of grace.
The allowance of days of grace is a usage which pervades the whole commercial world. It is now universally understood to enter into every bill or note of a mercantile character, and to form so completely a part of the contract that the bill does not become due in fact or in law on the day mentioned on its face, but on the last day of grace. A demand of payment previous to that day will not authorize a protest or charge the drawer of the bill.
This is universally admitted if the bill has been accepted.
If it has been noted for nonacceptance but has been held up, it would not be protested for nonpayment until the last day of grace. Why, then, should a bill never presented be demandable at an earlier day than if it had been accepted or if acceptance had been refused? Whatever might have been the original motive for the indulgence, it is now taken into consideration both by the drawer and payee of the bill. The amount is consequently estimated, on the calculation, that it becomes really due on the last day of grace. Neither party can foresee, when the bill is drawn, whether it will be paid or not, nor, if it be payable after date, whether it will be presented or not. Their calculation, therefore, as to the day when it becomes really due and is to be paid is independent of these considerations. No sufficient reason is perceived for the distinction.
It is, however, a law dependent on usage. The books which treat on the subject concur in saying that payment must be demanded when the bill falls due, and that it falls due on the last day of grace. The distinction between a bill which has and which has not been presented has never been taken, and it is apparent that a bill is never drawn with a view to this distinction. The fact that the question has never been made is a strong argument against it. The point has never, so far as we can find, been brought directly before a court, and we have seen only one case in which it has been even incidentally mentioned.
In Anderson v. Beck & Pearson, 16 East 248, a bill was drawn payable two months after date, and was not presented for acceptance. It was protested for nonpayment, and a suit was brought by the holder against the drawer. He resisted the demand, and the opinion of the court proceeds on the admission that the bill feel due on the last day of grace. This case consists, we believe, with the opinions and practice of commercial towns.
But if a bill, payable after date and not presented for acceptance, falls due on the same day as if it had been accepted, the defendants in error insist that payment ought to have been demanded on the last day of grace.
It was proved at the trial that the settled usage of the Bank of Washington at that time and of all the other banks in Washington and Georgetown was to demand payment on the day succeeding the last day of grace, and this usage, so far as respects notes negotiable in a particular bank, has been sanctioned by the decisions of this Court. Renner v. the bank of Columbia, 9 Wheat. 582, was a suit brought in a Circuit Court of the District of Columbia against the endorser of a
promissory note which had been negotiated in the bank of Columbia. Payment was demanded and the note protested on the fourth day after that mentioned in the note as the day on which it became payable. This was proved to have been in conformity with the custom of the bank, and the defendant moved the court to instruct the jury that the demand was not in time and that the endorser was not liable for the note. This instruction was refused, and the defendant brought the judgment into this Court by writ of error. The judgment, on great deliberation, was affirmed.
In this case, the custom of the bank was known to the parties to the note. But the question arose afterwards in a case in which the custom was not known to the parties. Mills v. bank of the United States, 11 Wheat. 430, was a suit brought by the bank against the plaintiff in error and others on a note endorsed by him and negotiated in the office of discount and deposit of the bank of the United States, which was protested for nonpayment on the day of the last day of grace.
It was proved at the trial that this was according to the usage of that bank. The counsel for the defendant moved the court to instruct the jury that this usage could not bind the endorser unless he had personal knowledge of it at the time he endorsed the note. The court refused to give the instruction, and the jury found a verdict for the bank, on which judgment was rendered. That judgment was brought before this Court and affirmed. The Court said that
"when a note is made payable or negotiable at a bank, whose invariable usage it is to demand payment and give notice on the fourth day of grace, the parties are bound by that usage, whether they have a personal knowledge of it or not."
In the case of such a note, the parties are presumed by implication to agree to be governed by the usage of the bank, at which they have chosen to make the security itself negotiable.
These cases decide that under consideration unless there be a distinction between a bill and a note made negotiable in a particular bank. In the case of a note negotiable in a particular bank, the parties may very fairly be presumed to be acquainted with the usage of that bank. As the decisions which have been cited depend upon that presumption, it will become necessary to inquire how far the same presumption may be justified in the case of a bill drawn on a person residing in a place where this usage is established.
If a promissory note were made in the City of Washington payable to a person residing in the same place, though not purporting to be payable and negotiable in bank, it would very probably be placed in a bank for collection. It is a common
practice, and the parties would contemplate such an event as probable when the note was executed.
The same reason seems to exist for applying the usage of the bank to such a note, as to one expressly made payable and negotiable in bank. Such notes are frequently discounted, and certainly the person who discounts them or places them in bank for collection stands in precisely the same relation to the bank, as respects its usage, as if the notes purported on their face to be negotiable in bank. The maker of a negotiable paper in such a case may fairly be presumed to be acquainted with the customary law which governs that paper at his place of residence.
In the case at bar, however, the bill was drawn at Alexandria, on a person residing at Washington. Does this circumstance vary the law of the case?
The usage by which questions of this sort are governed is different in different places. It varies from three to thirty days -- and the usage of the place on which the bill is drawn or where payment is to be demanded, uniformly regulates the number of days of grace which must be allowed. This bill being drawn on a person residing in Washington and being protested for nonpayment in the same place is, according to the law merchant, to be governed by the usage of Washington. Could this be questioned, still the holder of the bill, who placed it, by his agent, in the Bank of Washington for collection, who has made that bank his agent, without special instructions, submits his bill to their established usage. The cases, then, which have been cited are not different in principle from this -- and payment having been demanded according to the invariable usage of the bank was demanded in time. If then the objections to the conduct of the bank were confined to the demand of payment and protest for nonpayment, the first instruction asked by the defendants in the circuit court, ought to have been given. But they are not confined to the demand of payment and to the protest for nonpayment. They extend to the steps taken by the bank concerning the presentation of the bill.
The second instruction asked for is in terms which are in some degree equivocal. It may imply either that the recourse against the drawer of the bill was not lost or that if lost that circumstance would not entitle the plaintiff to recover against the bank; as its decision is not essential to the cause, it will be passed over.
The third is more specific. The court is asked to say that the failure of the bank to give notice to the drawer that the drawee was not found at home when called upon to accept
the bill is not such negligence as discharged the drawer from his liability and entitles the plaintiff to recover.
The question suggested by this prayer is one on which no decision is found in the books. It depends on analogy so far as it is to be decided by adjudged cases. Such a bill need not be presented, but if presented and acceptance be refused, it is dishonored and notice must be given. Had the bank taken no step whatever to obtain an acceptance, no violation of duty would, according to these decisions, have been committed. Can any unsuccessful attempt to do that which the law does not require place the agent in the same situation that he would have stood in had the drawee been found and had positively refused acceptance? Absence from home, with a failure to make provision for payment when a bill becomes due, is a failure to pay, but absence from home when the holder of a bill or his agent offers it for acceptance is in no respect culpable. Had the drawee received advice of the bill, he could not have not known that it would be presented for acceptance, because the law did not require it, and is consequently not blameable for his absence when the officers of the bank came to present it for acceptance. Had the bill, under such circumstances, been protested for nonacceptance and returned, the drawer might not have been liable for it.
The bill, then, on general principles ought not to have been protested, and the absence of the drawee ought not to be considered as equivalent to his refusal to accept. It might have been a prudent precaution to have given information that the bill was not accepted because the drawer had not been found, but we cannot say that the omission would subject the agent to loss unless such was the special usage of this bank.
4. The fourth prayer is for an instruction to the jury that if they believe from the evidence that the defendants conformed to their former usage in regard to such bills, in calling on the drawee for acceptance (the said drawee being from home) and not noting the same as dishonored, and giving notice thereof to the parties on the said bill, then their failure to treat the said bill as dishonored and to give notice accordingly of nonacceptance did not discharge the drawer thereof from his liability to the plaintiff.
The court has already indicated the opinion that this omission to treat the bill as dishonored in consequence of not finding the drawee at home if the usage of the bank was not to notice such a circumstance did not discharge the drawer; consequently this instruction ought to have been given unless it should be supposed foreign to the case in which it was asked. In a suit brought by the holder against the bank, the
court was not bound to declare the law as between the holder and the drawer unless the liability of the bank was determined by the liability of the drawer. Although in the general, the one question depends on the other, yet it may not be universally so. The bank was the agent of the holder, not of the drawer, and might consequently so act as to discharge the drawer without becoming liable to its principal. In this case, however, as the agent received on specific instructions, but was left to act according to the law merchant, a course of proceeding which did not discharge the drawer could not render the agent liable to the principal. This prayer was therefore essentially the same with that which preceded it, with this difference. The third prays an instruction, whatever might be the usage of the bank; the fourth prays essentially the same instruction provided the conduct of the bank conformed to its usage. This instruction therefore ought to have been given as prayed. Upon a review of the whole case, the Court is of opinion that if the bank acted in conformity with its established usage in not noting the bill and giving notice thereof when the ineffectual attempt was made to present it for acceptance, this action could not be supported. With respect to this usage, the testimony is contradictory, and ought to have been submitted to the jury in conformity with the last prayer made by the counsel for the bank. The court erred in not giving this instruction, as prayed. The judgment, therefore, is to be
Reversed and the case remanded for a new trial.
This cause came on, &c.;, on consideration whereof, this Court is of opinion that the circuit court erred in refusing to instruct the jury that if it believed that the defendants conformed to their former usage in regard to such bills as the one in question, in calling on the drawee for acceptance (the said drawee being from home) and not noting the same as dishonored, and giving notice thereof to the parties on the said bill, then their failure to treat the said bill as dishonored and to give notice accordingly of nonacceptance did not discharge the drawer thereof from his liability to the plaintiffs. It is therefore considered by the Court that the said judgment be reversed and annulled and that the cause be remanded to the said circuit court with directions to award a venire facias de novo, and to proceed therein according to law.